Trade War with China
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It's not as easy as Trump thought. At an average salary of 54,000 dollars a year, how are they going to compete cost-wise with countries having an average salary of like 10,000 dollars a year?
Spotlight: Moving manufacturing back to U.S. hard, Foxconn's case shows
Kurt Bauer, president and CEO of Wisconsin Manufacturers & Commerce, receives an interview with Xinhua in Madison, capital of state of Wisconsin, the United States, Nov. 1, 2018. Residents' opposition, labor shortage, and technology transfer difficulties are the three main reasons why manufacturing companies like Foxconn could not move back to the United States easily, industry insiders and analysts have said. Being built on a vast 2,800 acres of land in the U.S. State of Wisconsin, the Foxconn plant project is dubbed by U.S. President Donald Trump as the "eighth wonder of the world" for the scale of investment, the number of new jobs it promises to bring in, and the hundreds of upstream and downstream manufacturing companies that potentially would follow suit. The company, which makes products for Apple, Sony, Microsoft and Nintendo, among others, in 2017 signed a contract with Wisconsin Economic Development Corporation for the display screen plant worth 10 billion U.S. dollars. According to the contract, Foxconn will build a 21.5-million-square-foot (20-square-kilometer) manufacturing campus and hire about 13,000 local workers, and Wisconsin promised to provide an incentive package worth about 4 billion dollars, the largest subsidy offered to a foreign company in U.S. history. TO GO WITH "Spotlight: Moving manufacturing back to U.S. hard, Foxconn's case shows" (Xinhua/Wang Ying)
NEW YORK, Feb. 1 (Xinhua) -- Residents' opposition, labor shortage, and technology transfer difficulties are the three main reasons why manufacturing companies like Foxconn could not move back to the United States easily, industry insiders and analysts have said.
Being built on a vast 2,800 acres of land in the U.S. State of Wisconsin, the Foxconn plant project is dubbed by U.S. President Donald Trump as the "eighth wonder of the world" for the scale of investment, the number of new jobs it promises to bring in, and the hundreds of upstream and downstream manufacturing companies that potentially would follow suit.
The company, which makes products for Apple, Sony, Microsoft and Nintendo, among others, in 2017 signed a contract with Wisconsin Economic Development Corporation for the display screen plant worth 10 billion U.S. dollars.
According to the contract, Foxconn will build a 21.5-million-square-foot (20-square-kilometer) manufacturing campus and hire about 13,000 local workers, and Wisconsin promised to provide an incentive package worth about 4 billion dollars, the largest subsidy offered to a foreign company in U.S. history.
The project moved fast, but problems soon followed. In what local officials described as the "Foxconn pace," the plant broke ground in June and soon caused considerable controversy.
LOCAL OPPOSITION
Residents who had to move away to make space for the Foxconn campus were offered assistance in relocation and compensation by market value or higher. Yet some were still unhappy as their lives had been disrupted.
Moreover, the public has become aware of the spiralling costs for the new job opportunities. It is estimated that each new job created could cost the government as much as 1 million dollars, eight times the average amount of subsidies local governments offer to similar projects.
Officials who had worked on the deal said the incentive package should be viewed as an investment made by the state rather than free money for the company.
However, statistics showed that citizens might see a return on their Foxconn investment in 2042 at the earliest, according to the Legislative Fiscal Bureau, a nonpartisan agency that provides economic analysis to the Wisconsin state legislature.
Many local residents felt it was a waste of money and called on governments to rethink their package and put the money into other social benefit projects such as education.
"It's a lousy deal, and we're going to have to hold Foxconn's feet to the fire going forward," Wisconsin's Governor-elect Tony Evers said.
LABOR & TALENT SHORTAGE
In addition, Wisconsin has seen a tightening labor market in the last few years, with the unemployment rate steadily registering 3 percent or lower in nine months, which made it difficult for companies to look for workers, let alone skilled ones or engineers.
Kurt Bauer, president and CEO of Wisconsin Manufacturers & Commerce, said that the association has about 3,800 members, half of which are manufacturing companies. Around 80 percent of the members have seen a labor shortage in one way or another.
Ian Robertson, dean of the University of Wisconsin-Madison college of Engineering, said the college has 800 graduates every year. They have about 6,000 job opportunities to choose from, most of which are outside of the state.
To meet the demand for engineers, the college plans to expand their enrollment from around 4,500 to 5,200 in the next few years. But after graduation, how many of the students will be hired by Foxconn is hard to say.
Robertson said many companies in need of engineers tend to build long-term relationships with the university by establishing labs and offering internships. "Foxconn is just one of them," he said.
In Foxconn's case, the average salary it promised is 54,000 dollars a year, obviously lower than the average salary for engineers in the state, which is about 60,000 dollars. In addition, having employees work 50-60 hours a week would be difficult.
"The U.S. educational system is probably not even generating enough for the current demand in the United States with the economy strong and high-tech industry developing well," said Jason Dedrick, professor at the School of Information Studies at Syracuse University.
"You already have a lot of companies, Google, Facebook, Amazon and so on, competing for those engineers. Apple or rather its suppliers, will be trying to hire engineers in a market that's already pretty tight. It would not be really easy to do that hiring really quickly," he added.
TECHNOLOGY TRANSFER FORESEES HIGH COST
According to Prof. Dedrick's estimate, the cost of an iPhone will rise by 30 dollars if Apple moves its final assembly lines to the United States. If Apple manufactures components and assembles them in the country, the cost will go up by 100 dollars with the investment, labor and logistics involved.
What's more, the relocation to the United States would also see rising prices of many supplier items produced outside the United States, including semi-conductors, processors, memory, displays, batteries, the plastic and metal enclosures.
"Our industry involves highly customized products. It requires both strong research and development ability and industry scale. So, moving the supply chain would be a long shot," said Meng Wu Peng, deputy general manager of Lens Technology, which manufactures cover-glass for smartphone brands such as Apple and Samsung.
Foxconn has hinted for months that it might shift focus to research and development facilities rather than large-scale manufacturing, casting doubts on its ability to live up to its promises. Enditem
Spotlight: Moving manufacturing back to U.S. hard, Foxconn's case shows
Kurt Bauer, president and CEO of Wisconsin Manufacturers & Commerce, receives an interview with Xinhua in Madison, capital of state of Wisconsin, the United States, Nov. 1, 2018. Residents' opposition, labor shortage, and technology transfer difficulties are the three main reasons why manufacturing companies like Foxconn could not move back to the United States easily, industry insiders and analysts have said. Being built on a vast 2,800 acres of land in the U.S. State of Wisconsin, the Foxconn plant project is dubbed by U.S. President Donald Trump as the "eighth wonder of the world" for the scale of investment, the number of new jobs it promises to bring in, and the hundreds of upstream and downstream manufacturing companies that potentially would follow suit. The company, which makes products for Apple, Sony, Microsoft and Nintendo, among others, in 2017 signed a contract with Wisconsin Economic Development Corporation for the display screen plant worth 10 billion U.S. dollars. According to the contract, Foxconn will build a 21.5-million-square-foot (20-square-kilometer) manufacturing campus and hire about 13,000 local workers, and Wisconsin promised to provide an incentive package worth about 4 billion dollars, the largest subsidy offered to a foreign company in U.S. history. TO GO WITH "Spotlight: Moving manufacturing back to U.S. hard, Foxconn's case shows" (Xinhua/Wang Ying)
NEW YORK, Feb. 1 (Xinhua) -- Residents' opposition, labor shortage, and technology transfer difficulties are the three main reasons why manufacturing companies like Foxconn could not move back to the United States easily, industry insiders and analysts have said.
Being built on a vast 2,800 acres of land in the U.S. State of Wisconsin, the Foxconn plant project is dubbed by U.S. President Donald Trump as the "eighth wonder of the world" for the scale of investment, the number of new jobs it promises to bring in, and the hundreds of upstream and downstream manufacturing companies that potentially would follow suit.
The company, which makes products for Apple, Sony, Microsoft and Nintendo, among others, in 2017 signed a contract with Wisconsin Economic Development Corporation for the display screen plant worth 10 billion U.S. dollars.
According to the contract, Foxconn will build a 21.5-million-square-foot (20-square-kilometer) manufacturing campus and hire about 13,000 local workers, and Wisconsin promised to provide an incentive package worth about 4 billion dollars, the largest subsidy offered to a foreign company in U.S. history.
The project moved fast, but problems soon followed. In what local officials described as the "Foxconn pace," the plant broke ground in June and soon caused considerable controversy.
LOCAL OPPOSITION
Residents who had to move away to make space for the Foxconn campus were offered assistance in relocation and compensation by market value or higher. Yet some were still unhappy as their lives had been disrupted.
Moreover, the public has become aware of the spiralling costs for the new job opportunities. It is estimated that each new job created could cost the government as much as 1 million dollars, eight times the average amount of subsidies local governments offer to similar projects.
Officials who had worked on the deal said the incentive package should be viewed as an investment made by the state rather than free money for the company.
However, statistics showed that citizens might see a return on their Foxconn investment in 2042 at the earliest, according to the Legislative Fiscal Bureau, a nonpartisan agency that provides economic analysis to the Wisconsin state legislature.
Many local residents felt it was a waste of money and called on governments to rethink their package and put the money into other social benefit projects such as education.
"It's a lousy deal, and we're going to have to hold Foxconn's feet to the fire going forward," Wisconsin's Governor-elect Tony Evers said.
LABOR & TALENT SHORTAGE
In addition, Wisconsin has seen a tightening labor market in the last few years, with the unemployment rate steadily registering 3 percent or lower in nine months, which made it difficult for companies to look for workers, let alone skilled ones or engineers.
Kurt Bauer, president and CEO of Wisconsin Manufacturers & Commerce, said that the association has about 3,800 members, half of which are manufacturing companies. Around 80 percent of the members have seen a labor shortage in one way or another.
Ian Robertson, dean of the University of Wisconsin-Madison college of Engineering, said the college has 800 graduates every year. They have about 6,000 job opportunities to choose from, most of which are outside of the state.
To meet the demand for engineers, the college plans to expand their enrollment from around 4,500 to 5,200 in the next few years. But after graduation, how many of the students will be hired by Foxconn is hard to say.
Robertson said many companies in need of engineers tend to build long-term relationships with the university by establishing labs and offering internships. "Foxconn is just one of them," he said.
In Foxconn's case, the average salary it promised is 54,000 dollars a year, obviously lower than the average salary for engineers in the state, which is about 60,000 dollars. In addition, having employees work 50-60 hours a week would be difficult.
"The U.S. educational system is probably not even generating enough for the current demand in the United States with the economy strong and high-tech industry developing well," said Jason Dedrick, professor at the School of Information Studies at Syracuse University.
"You already have a lot of companies, Google, Facebook, Amazon and so on, competing for those engineers. Apple or rather its suppliers, will be trying to hire engineers in a market that's already pretty tight. It would not be really easy to do that hiring really quickly," he added.
TECHNOLOGY TRANSFER FORESEES HIGH COST
According to Prof. Dedrick's estimate, the cost of an iPhone will rise by 30 dollars if Apple moves its final assembly lines to the United States. If Apple manufactures components and assembles them in the country, the cost will go up by 100 dollars with the investment, labor and logistics involved.
What's more, the relocation to the United States would also see rising prices of many supplier items produced outside the United States, including semi-conductors, processors, memory, displays, batteries, the plastic and metal enclosures.
"Our industry involves highly customized products. It requires both strong research and development ability and industry scale. So, moving the supply chain would be a long shot," said Meng Wu Peng, deputy general manager of Lens Technology, which manufactures cover-glass for smartphone brands such as Apple and Samsung.
Foxconn has hinted for months that it might shift focus to research and development facilities rather than large-scale manufacturing, casting doubts on its ability to live up to its promises. Enditem
It's not as easy as Trump thought. At an average salary of 54,000 dollars a year, how are they going to compete cost-wise with countries having an average salary of like 10,000 dollars a year?
Spotlight: Moving manufacturing back to U.S. hard, Foxconn's case shows
It's much more than just the salary. It's about skilled labor supply; it's about supply chain and industrial eco-system. A couple of days ago, NYT reported about how . Tim Cook has made similar comments about doing manufacturing in China in several occasions. China becoming the world's factory is due to several mutually-reinforcing factors at play: the large supply of skilled and hard-working labor force, the advanced infrastructure (how many of the top-10 largest container ports in the world are Chinese?), the industrial supply chain, the huge domestic market, and last but not least, the supporting governments at all levels. How many countries in the world can compete with China comprehensively in manufacturing?
There have been a lot of chatters about moving much of manufacturing to other developing countries from China in the last decade, and more so in the last year. There have not been much success though. And it's not because of lack of trying. Foxconn's own experiences demonstrate that. In the last decade, Foxconn has tried to build large assembly centers in Brazil, India and other countries to diversify from China. Now it's the US. They have all failed, for good reasons. Vietnam is often cited as a successful example of replacing China. Well, Vietnam has also benefited from its proximity to China; it depends significantly on Chinese suppliers. That's why you're seeing while Vietnam has a booming export sectors, its import from China is also "booming." Vietnam is a mid-sized country, but it's still too small to completely replace China, as many in the US/West has hoped. Besides Vietnam, who else can you think of?
Now, the American don't need to feel bad about not being able to assemble iPhones and a host of other manufacturing. It's the nature of globalization and every country benefits from it. The US has a lot of highly skilled workers in many industries that many countries, including China, can not hope to compete.
People talk about China is aging and wage increasing and therefore China will gradually lose its competitiveness in manufacturing. That is all true, to some degree. But it's happening over time, not overnight. The more important trend is that China is rapidly moving up the value-chain, and investing in factory automation, robots, IoT, AI and such. Since the industrial revolution, manufacturing is without exception the stepping stone for a country to become modernized. The sad thing is, China may be the last large country able to do so ...
This is the contridiction and paradox of Trump's, and the neo-con's, economic policy.
Trump and the neo-con thinks, that by applying tariff on China wil increase cost in China relative to the US thus encourage manufacturers to return to the US. (As well as hurting China and make him look good "the self proclaimed tariff man" and "trade war are easy to win")
But. They knew that in neo-liberal economic theory, its suggested that businesses will always seek to produce goods at lowest cost. Thus paradoxically will contridict their policy of bring jobs back to America and thus make (America great again!
In addition, the economic theory suggest that businesses always seek to manufacture where costs is the lowest.
However, this theory hasn't been born out in reality. If it had. Countries like India, sub-Sahara Africa, and some Latin American countries would be experiencing increase manufacturing activities at the expense of the chinese.
This is because businesses decision making is more than just lowest cost. It's a combination of other factors,
Such as: the skills, education level and availability of the labour force. The size of the labour force. The size of the market. The stability of the government and legal environment. Etc. I can go on!
I believe Trump and his advisors knew this, and as such the ideal of the campaign and slogan of bring back jobs to America to make "America great again" is a false promise that they know deep in their hearts that they can't make good on.
AssassinsMace
Lieutenant General
I know someone who told me that at her workplace there was female Mexican employee who said she would never go to China for fear of being kidnapped because Mexicans are such hard workers believing she was a precious commodity vied for by China. That's like hearing Indians say they have an advantage over China because they can speak English. And China is the second most powerful country in the world and threatening to take the No.1 position from the US without speaking English or having a Mexican workforce...
During the cold war, both the USA and USSR were very wary of their conventional forces ever getting into a local conflict.
That was because in all the wargames, even a small skirmish would eventually escalate into a nuclear exchange, because both sides were locked in a competition where neither side could back down.
So if China is recognised as having a sufficiently large nuclear arsenal for MAD, a similar logic will apply between China and the USA, although day-to-day relations are much better between them.
Plus I don't see doubling military spending from 2% to 4% as technically a "surge".
Going to 4% would be a sustained indefinitely if the strategic circumstances warrant this.
During the past 15 years, the USA and Russia regularly spent this amount.
And of course, during the cold war, military spending was so much higher T 15%+ for USSR, 6% for the USA, etc
Equation
Lieutenant General
Conventional conflicts can escalate into nuclear ones but not when done right. The US is in Syria today because Russian conventional forces are too weak. Otherwise, they can safely muscle the US out under the correct reasoning that Russian forces are invited by Syria's government while American forces are invading Syria. With the clear geographical advantage, if Russian conventional forces were strong enough, they would implement quick power plays and shut the US out before there as even a chance to get into a conflict that might go nuclear. The US dared to strike a Chinese embassy in Yugoslavia because Chinese conventional forces weren't all over the place with modern weapons breathing down the necks of their American counterparts. The 1993 Yinhe Incident occurred because China's navy could not protect its merchant ships; a more powerful conventional navy could have sailed to the Yinhe and guided it right out of America's blockade threatening unequivocal reciprocation to any use of force to stop them. There is virtually no threat of nuclear escalation in these cases. This is why people invest in the conventional military. They're not all idiots wasting their money.
As to the specific percentage that should be invested in the military for China, I don't know and cannot begin to do any calculations with the information available to me. In general, the less you spend on the military, the faster you grow your economy and thus in the long run you will increase your ability to afford and maintain a large military. However, the threat of immediate challenge and inability to keep up with modern weapons rises. The higher the percentage spent, the lower this immediate threat is, but at the price of somewhat diminished ability to afford a larger military in the long run. I trust Beijing to find this balance.
Happy Chinese New Year to all!
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